COVID crisis causes dairy surplus, dumping

  • Holstein calves at the Morrill Dairy Farm in Penacook. The Morrill Farm has had to dump 5 percent of its surplus milk.  GEOFF FORESTER

  • Milking cows at the Barlett Farm Dairy on Josiah Bartlett Road in East Concord wait out the rain on Monday, October 9, 2017. GEOFF FORESTER

  • Ryan Morrill cleans out a holstein calf hutch at the family Morrill Dairy Farm in Penacook on Friday, January 4, 2018. The sons were working the farm while their parents were talking to U.S. Sen. Jeanne Shaheen about the effects of the shutdown on the farming industry. GEOFF FORESTER

Granite State News Collaborative
Published: 4/24/2020 4:46:54 PM

In the wake of the COVID-19 pandemic, the dairy industry saw two of its major markets — restaurants and schools — dry up overnight leading to a surplus of milk nationally and the dumping of millions of pounds of milk that could not be sold.

2020 was looking like the year dairy farmers would emerge from depressed milk prices but that surplus is once again driving down prices and many fear will drive more dairies out of business. “It’s going to take several years to get out of this. The survival of small dairy farms has yet to be established at this point. They are standing on shakier ground than ever before,” said Amy Hall, director of Granite State Dairy Promotion. “They are going to feel some financial pain because they have never seen demand get cut so quickly and so severely.”

Rob Johnson, policy director for the NH Farm Bureau, noted 7 percent of all milk produced by the largest dairy cooperative in the country nationwide was dumped in one week in early April due to the surplus. Hall said while the amount of milk dumping in NH was not known, dairies in New England have dumped 18 million pounds of milk in the past three weeks.

“They [dairy farmers] lost the school market and restaurants. That has been an enormous hit,” she said.

Hall has also raised concerns that despite the surplus, some grocery stores have limited the amount of milk customers can purchase, deepening the economic hit that dairy farmers in the state are taking.

Since she raised those concerns in early April, most stores have lifted those limits but not all. Shawn Jasper, commissioner of the NH Department of Agriculture, says any perceived milk shortages at stores was chiefly due to stores relying on computer ordering models that are based on seasonal sales in previous years and were not initially adjusted for more demand due to the COVID-19 pandemic. “It backed things up in the supply chain and led to dumping,” Jasper says. “That is beginning to change.” Sales of milk in stores is up 35 percent and while that will help alleviate the need to dump as much milk, it will not prevent a surplus and the need to dump milk, Jasper says.

Hall said some of the reasons stores have given for limiting milk sales range from being short-staffed, to glitches in computer ordering systems to lack of cold storage space. She stresses there is no need to ration or horde milk.

Dairy farmers are seeing markets shrink overseas as well. International trade markets have dipped anywhere between 15 to 17 percent, Hall said.

Jasper said all these challenges at the national and international levels are being felt by the state’s dairy farmers. “We are not an island unto ourselves. It will have a huge impact on milk prices. Milk prices to farmers could drop by more than one-third and put most farmers out of business,” if the pandemic drags out, Jasper said. “If nothing changes, it will be devastating and we will lose even more farms.”

Among NH’s dairy farmers affected by the crisis is Morrill Farm Dairy in Penacook. The fourth-generation family farm is run by Rob Morrill, his wife and three sons.

Morrill received a letter from his dairy cooperative stating the coop has seen sales drop 12 percent since the onset of the COVID-19 crisis and had to dump 5 percent of its surplus milk. Beginning May 1, the cooperative will be guaranteeing full price for up to 85 percent of what the dairies produced in March. Any milk produced over that amount will be paid at a substantially reduced price. “We’ve got to try and curtail our production,” Morrill says. “Right now we are facing the unknown.”

He adds dumping milk is a last resort solution and there is an effort to get surplus milk to food banks instead.

Dairy industry under pressure

The dairy industry in NH is relatively small but plays a major role in the state’s agricultural sector. There are about 90 dairy farms in New Hampshire, down from about 125 five years ago, Johnson said.

The New Hampshire dairy industry generates $55 million in state tax revenue, employs 5,300 and generates annual sales of $191 million, which is 30 percent of the state’s total gross agricultural sales, Hall said. New Hampshire dairy farms average 120 milking animals per farm and account for 70 percent of farmed land in the state.

Dairy farms were already operating under tight margins after four consecutive years of low dairy prices and Jasper said prices had finally begun to rise again in 2019. “It was starting to come back and we were looking forward to 2020 looking better,” says Charles Price, who runs his Price Family Farm in Gilmanton Irons Works with his son and grandson, producing 1.7 million pounds of milk annually with 70 cows. With the surplus created by COVID-19, prices are again plummeting.

“It looks like we’ll have to tighten our belts,” Price says. “I won’t be buying any new equipment, that’s for sure.”

The price farmers will be paid for their milk is projected to drop to $12 per 100 weight by June, Jasper says. Hall said many dairy farmers in the Northeast region need $19 per 100 pounds to just break even. “It is devastating,” she said.

A number of factors had already put economic strain on the dairy industry before the COVID-19 crisis, including less people drinking milk as more non-dairy alternatives entered the marketplace, Johnson says.

Another factor is dairy farmers across the country were adding more cows when prices were down in order to make up revenue losses but continued to add cows when prices were high to capitalize on those prices, Jasper said. That contributed to the depressed milk prices, he said.

“Even though tens of thousands of dairy farmers have gone out of business across the country, the number of cows didn’t seem to fall,” he said.

Jasper said cooperatives were slow to limit the amount of milk they would accept but are now doing so in light of the crisis.

Federal relief

The Coronavirus Aid, Relief, and Economic Security (CARES) Act included $9.5 billion in emergency response funds to provide direct support to farmers, including dairy farmers. The CARES Act also adds $14 billion to the Commodity Credit Corporation, which can also be used to assist farmers. Using those funds, the U.S. Department of Agriculture relief program will provide $16 billion in direct support to farmers affected by COVID-19. The federal government will also purchase $3 billion in fresh produce, dairy, and meat to be distributed to food banks and other nonprofits. That plan includes spending $100 million per month on dairy products.

Hall said while the federal aid is helpful it is a “teardrop in an ocean of need.” The Northeastern Association of State Departments of Agriculture sent a letter to U.S. Agriculture Secretary Sonny Perdue urging him to put in price support provisions that would not allow dairy prices to fall below $19.50 per 100 weight, Jasper says, which is considered to be a break-even price for dairy farms.

Farmers were also eligible to apply for the payroll protection loans though the CARES Act. Morrill, who has a full-time employee and three part-time employees, applied but said he did not receive a response yet. Morrill says his farm will likely see some of the federal relief money and while it will help, it will not make up for the shortfall in revenue. He is waiting to see what the guidelines will be as to how it will be disbursed.

Price initially did not plan on needing federal aid. “I’m fortunate enough that I don’t have any loans I need to repay,” Price says. However, he received a letter from his coop stating it had to dump surplus milk and that milk prices would be dropping. “It is way below margin to produce milk,” Price says.

Programs aim to help

There are efforts at the state level to help NH farmers. The University of New Hampshire Cooperative Extension created an interactive map on its web site to connect residents with local farms, including more than 35 dairy farms across the state. UNH Extension teamed up with the New Hampshire Department of Agriculture to gather the farm listings. The online map includes farm locations and contact information, product categories, online and social media links and more.

Once the economy opens again, Hall wants to see the state move forward with the “NH’s Own” Dairy Premium Program. The dairy premium program bill, signed by Gov. Chris Sununu last year, allows the NH Department of Agriculture to market milk from NH dairies with a “NH’s Own” label, allowing consumers to opt to pay for NH products with a 50-cent premium that would be returned directly to the farmers. The program was in development but put on the backburner when the COVID crisis hit. “It’s even more important now than its ever been to get this product on the shelves,” Hall said.

The NH Department to Agriculture surveyed shoppers and found more than 80 percent supported such a program. Jasper said his department will be working to bring the program to fruition once the crisis has passed.

“We need people supporting New Hampshire agriculture and buying products that may be a little more expensive but are better quality products,” Jasper says.

These articles are being shared by partners in The Granite State News Collaborative. For more information visit collaborativenh.org. 




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